Asian stock markets have fallen dramatically amid escalating fears of a global trade war – as Donald Trump called his tariffs “medicine” and showed no sign of backing down.
Hong Kong’s Hang Seng index of shares closed down 13.2% – its biggest one-day drop since 1997, while the Shanghai composite index lost 7.3% – the worst fall there since 2020.
Elsewhere, Japan’s Nikkei 225 lost 7.8%, while London’s FTSE 100 was down 4.85% by 9am.
US stock market futures signalled further losses were ahead when trading begins in America later.
At 4am EST, the S&P 500 futures was down 4.93%, the Dow Jones 4.32% and the Nasdaq 5.33%.
Markets are reacting to ongoing uncertainty over the impact of President Trump’s tariff regime on goods imported to the US, which he announced last week.
Image: A screen showing the Hang Seng index in central Hong Kong. Pic: Reuters
Speaking on Air Force One on Sunday, Mr Trump said foreign governments would have to pay “a lot of money” to lift his tariffs.
“I don’t want anything to go down. But sometimes you have to take medicine to fix something,” he said.
The US president said world leaders were trying to convince him to lower further tariffs, which are due to come into effect this week.
“I spoke to a lot of leaders, European, Asian, from all over the world,” Mr Trump told reporters.
“They’re dying to make a deal. And I said, we’re not going to have deficits with your country.
“We’re not going to do that because to me, a deficit is a loss. We’re going to have surpluses or, at worst, going to be breaking even.”
Mr Trump, who spent much of the weekend playing golf in Florida, posted on his Truth Social platform: “WE WILL WIN. HANG TOUGH, it won’t be easy.”
Reality hits that trade war no longer just a threat
China’s announcement of its tariff retaliation came late afternoon on Friday local time.
Most Asian markets closed shortly after – and markets in China, Hong Kong and Taiwan were closed for a public holiday – meaning the scale of the hit did not play out until today.
This morning we are getting a sense of the impact. Dramatic falls across all Asian markets clearly signal a realisation a global trade war is no longer just a threat, but a reality here to stay, and a global recession could yet follow.
Up until Friday, China’s response to Donald Trump’s tariffs had been perceived as restrained and designed to avoid escalation, the markets had reacted accordingly.
But that all changed last week when Mr Trump’s new 34% levy on all Chinese goods was matched by China with an identical tax. Both sit on top of previous tariffs levied, meaning many goods now face rates in excess of 50%.
These are numbers that make most trade between the world’s two biggest economies almost impossible and that will have a global impact.
China has clearly decided any forthcoming pain will have to be managed, and not being seen to be cowed and bullied by Mr Trump is being deemed more important.
But the scale of the retaliation will have further spooked the markets as it makes the prospect of negotiation and retreat increasingly unlikely.
Mr Trump added to the atmosphere of intransigence when he told the media on Sunday the trade deficit with China would need to be addressed before any deal could be done. The complete lack of concern from the White House over the weekend will also not have helped.
While smaller economies like Japan, South Korea, Cambodia and Vietnam are all lining up to attempt to negotiate, there are a lot of nations in that queue.
There is a sense none of this will be easily rectified.
On Saturday, US customs agents began collecting Mr Trump’s baseline 10% tariff.
Higher “reciprocal” tariffs of between 11% and 50% – depending on the country – are due to come into effect on Wednesday.
President Trump believes his policy will ultimately make the US richer, creating jobs and forcing companies to relocate more of their manufacturing to America.
However, his announcement has jolted economies around the world, triggered retaliatory levies from China and sparked fears of a global trade war.
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1:04
Trump’s tariffs: What you need to know
Investors and world leaders are unsure whether the US tariffs are here to stay or a negotiating tactic to win concessions from other countries.
Richard Flax, chief investment officer at Moneyfarm, said: “I guess there was some hope over the weekend that maybe we would see this as part of the start of a negotiation.
“But the messages that we’ve so far seen suggest that the President Trump is comfortable with the market reaction and that he’s going to continue on this course.
Goldman Sachs has raised the odds of a US recession to 45%, joining other investment banks that have also revised forecasts.
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In the UK, Sir Keir Starmer has promised “bold changes” and said he would relax rules around electric vehicles as British carmakers deal with a new 25% US tariff on vehicles.
The prime minister said “global trade is being transformed” by President Trump’s actions.
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2:53
‘Nothing off the table’ over tariffs
Meanwhile, KPMG warned tariffs on UK exports could see GDP growth fall to 0.8% in 2025 and 2026.
The accountancy firm said higher tariffs on specific categories, such as cars, aluminium and steel, would more than offset the exemption on pharmaceutical exports, leaving the effective tariff rate on UK exports around 12%.
Yael Selfin, chief economist at KPMG UK, said: “Given the economic impact that tariffs would cause, there is a strong incentive to seek a negotiated settlement that diminishes the need for tariffs.
“The UK automotive manufacturing sector is particularly exposed given the complex supply chains of some producers.”
In a stark and direct intervention, Martin Griffiths, the former UN humanitarian chief, has described the situation in Gaza as genocide.
The statement, made during an interview I conducted with Griffiths on The World, marks one of the most pointed accusations yet from a figure known to be deeply embedded in the world of international politics and diplomacy.
“I think now we’ve got to the point this is unequivocal. Of course it is genocide. Just as it is weaponising aid.
“We don’t need to look behind ourselves to see that’s the case. That should encourage us even more because we, of course, all doubted whether it would come to that level of definition.
“We all doubted whether famine is actually there. I think starvation is killing people. That’s bad enough. We don’t have to worry about famine, which is obviously there lurking in the shadows.
“Also, genocide… of course that’s what has happened. We only need to look at the statements made. Prime Minister Netanyahuhas the virtue of being very clear about his objectives.”
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3:14
Ex-Israeli aide dismisses genocide claims
His choice of words is extraordinary – not just for its gravity, but because it’s Griffiths who is saying it.
A veteran diplomat with decades of experience navigating complex international crises, Griffiths is known for his calm and thoughtful demeanour – not for inflammatory language.
For him to use the term “genocide” in a television interview signals a significant shift in how some within the international system are now interpreting events on the ground in Gaza – 20 months since Israel launched its war.
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Just weeks earlier, Tom Fletcher, another respected former British ambassador and current UN humanitarian chief, came close to using the phrase during a UN Security Council session.
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He said: “What more evidence do you need now? Will you act decisively to prevent genocide and to ensure respect for international humanitarian law? Or will you say instead: ‘we did all we could?'”
Whilst he stopped short, his tone showed a clear change in how leading international figures now view the direction of Israeli military operations in Gaza; staggering civilian deaths, and the statements made by Israeli officials prosecuting this war.
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Lawyers representing Israel against accusations brought by South Africa to the International Court of Justice last year – accusing its actions in Gaza of amounting to genocide – called the claims “unfounded”, “absurd” and amounting to “libel”.
They went on to say Israel respected international law and had a right to defend itself.
Now 41.2% of Europe finds itself in some form of drought, according to the latest update from the EU’s European Drought Observatory, which covers 11 to 20 May.
It is most acute in pockets of south-eastern Spain, Cyprus, Greece and Albania, where the strongest “alert” category has been issued, as well as parts of Poland and Ukraine.
But broad stretches of northern and eastern Europe through France, Germany, Poland and Ukraine also drying up, sowing concerns about crop yields.
On Thursday, the UK’s Environment Agency officially declared a drought in North West England after river and reservoir levels were licked away by a dry spring.
Image: More than 40% of Europe was in drought as of 11-20 May 2025. Pic: CEMS / EDO
Image: Heat was record high in March in Europe. The image on the right shows the south of the continent was much wetter than average and the north much drier. Source: Copernicus Climate Change Service
Greece tourism is ‘unsustainable’
In Greece, “overtourism” from millions flocking to its beaches adds further pressure to water supplies, said Nikitas Mylopoulos, professor of water resource management at Thessaly University.
“The tourist sector is unsustainable and there is no planning… leading to a tremendous rise in water demand in summer,” he told Sky News.
“The islands have an intense problem of drought and water scarcity.”
Islands like Santorini and Mykonos are now forced to ship in water from Athens or desalination plants to provide for showers and swimming pools. In the past, many residents could make do with local methods like rainwater harvesting.
But agriculture is a far bigger drain on the country’s water, with waste rife and policies lacking, said Prof Mylopoulos.
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1:55
‘Tropical nights’ soar in European hotspots
Wildfire season could be ‘particularly difficult’
This year’s hot and dry conditions are also fuelling the risk of yet another fierce wildfire season in Greece.
Last week civil protection minister Ioannis Kefalogiannis warned of a “particularly difficult” summer.
He said a record 18,000 firefighters have been deployed and the drone fleet almost doubled in a bid to combat fires being fuelled by a hotter climate.
Droughts and their causes are more complicated, but scientists at World Weather Attribution say global warming is exacerbating drought in some parts of the world, including around the Mediterranean.
Image: A drought was declared in northwest England on Thursday. Pic: Reuters
The International Hydropower Association said drought and intense rain in Europe are pushing power plants to “operate at the limits of their existing equipment”.
Extreme weather costs the EU about €28.3bn (£23.8bn) in lost crops and livestock per year, according to insurance firm Howden.
Hayley Fowler, professor of climate change impacts at Newcastle University, said: “With global warming, we expect more prolonged and intense droughts and heatwaves punctuated by more intense rainfall, possibly causing flash floods.
“In recent years, we have experienced more of these atmospheric blocks, causing record heat and persistent drought, as well as severe flooding in other locations in Europe.
“Recent months have been no different, with prolonged dry conditions and heatwaves in northern Europe and floods in southern Europe.”
At least 117 people have died and others are still missing after heavy flooding in Nigeria, an emergency official said.
Authorities initially said 21 people had died but this figure has today risen significantly.
Media reports quoting local government officials said a dam collapse has worsened the situation.
Ibrahim Hussaini, head of Niger State Emergency Management Agency, said some 3,000 houses were underwater in two communities.
Videos posted on social media show floodwater sweeping through neighbourhoods, with rooftops barely visible above the brown currents. One clip shows a tanker floating through a town.
Image: A tanker is swept away by floodwaters
The chairman of the Mokwa local government area suggested poor infrastructure has worsened the impact of the flooding.
Jibril Muregi has appealed to the government to start “long overdue” construction of waterways in the area under a climate resilience project.
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Image: Water appears to be flowing over a dam behind the town
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In a similar occurrence last September, torrential rains and a dam collapse in Nigeria’s northeastern Maiduguri caused severe flooding, leaving at least 30 people dead and displacing millions.
Nigeriais prone to flooding during the rainy season, which began in April – and flooding is becoming more common and extreme as the climate warms.
Hotter air is thirstier and can hold more moisture – about 7% more for every 1C warmer – meaning it unleashes heavier flooding when it rains.
Violent rain, which killed hundreds of people in Nigeria during 2022, was made at least 80 times more likely and 20% more intense by climate change, analysis by World Weather Attribution found.